Brexit insight - January 2020

An overview of insights and intelligence on the implications of Brexit on the Scottish and UK economy.

Trade relationships

The FSB has published a report on the opportunities of post-Brexit free trade agreements (FTAs) for SMEs.

It found that 46% of small exporters hoped to export to the USA over the next three years, while 38% and 36% respectively hoped to export to Germany and France.

The EU remained the most important trading bloc for 62% of exporters and 55% of importers, ahead of the United States, Mexico and Canada bloc, and the Comprehensive & Progressive Agreement for Trans-Pacific Partnership (CPTPP). The CPTPP is a free trade agreement involving New Zealand and 10 other countries in the Asia Pacific region.

Read full report

The Confederation of British Industry (CBI) has published Building a World-Leading UK Trade Policy on Britain’s post-Brexit trade deal negotiations, calling on the Government to work closely with business during the process and that formal business engagement, transparency and "a strong mandate based on economic evidence" would aid the UK in negotiations.

Recommendations include the creation of a Chief Business Trade Envoy, extension of the remit of the Department for International Trade’s Expert Trade Advisory Groups and establishment of a Strategic EU Trade Advisory Group for negotiations with the EU.

Read the full policy document

A SPICe briefing on negotiating the future economic and security relationship between the EU and the UK after Brexit has been published.

From a Scottish perspective, the key areas of interest will include:

  • A level playing field and regulatory alignment
  • Fisheries, food and drink and Protected Geographical Indications (PGIs)
  • Agriculture, services, justice
  • Security, immigration and mobility

The negotiations on the future UK and EU relationship are likely to begin shortly after the UK leaves the EU on 31 January 2020 and will be challenging, not least because the UK Government is insisting on concluding an agreement by the end of the transition (December 2020).

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A SPICe briefing from 10 January update covers:

  • Queen’s speech
  • European Union (withdrawal agreement) Bill
  • Legislative consent memorandum

Read full update

Business confidence

A survey from law firm CMS shows that businesses with a turnover of less than £1 million are more likely to be concerned about Brexit. The poll found 82% smaller firms felt negative about the effects of leaving the EU compared with 69% overall. Only 15% of the 100 key executives questioned saw Brexit as an opportunity.

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Research from finance company Premium Credit shows 34% of SMEs plan to increase stockpiling following the UK’s formal departure from the European Union and 58% have increased their borrowing to fund Brexit preparations.

The average small business has taken out around £4,700 in additional credit with nearly 10% increasing borrowing by more than £10,000, and 35% say they have increased some aspect of business insurance cover to help prepare for Brexit with a knock-on effect on cashflow.

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The latest Business Survey Tracker from Scottish Enterprise's Insights & Economics Team suggest:

  • There has been a rebound in business confidence since the result of the UK General Election, which businesses broadly interpreted as delivering greater clarity around Brexit
  • While this increase in confidence has been accompanied by businesses reporting improved hiring and investment intentions, it remains too early to identify any actual positive outcome of reduced uncertainty around Brexit
  • For now, Brexit-related uncertainty continues to have a negative impact on the UK and Scottish economies
  • In Scotland, business activity was stagnant in December and private sector employment unchanged
  • Demand continues to be weighed down by persistent uncertainty
  • There is some evidence greater clarity around Brexit has resulted in the commencement of previously delayed hiring plans by UK businesses
  • Greater clarity that Brexit will happen does not mean UK businesses fully understand the exact nature of the Brexit they will face, nor what it will mean for them

People and skills

The European Parliament has published an update on its work to support EU citizens in the UK after Brexit.

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The Federation of Small Business (FSB) has published a survey into business attitudes towards the Government’s post-Brexit immigration proposals.

It found widespread opposition to the proposed £30,000 salary threshold for skilled immigrants, with 81% of businesses saying they would be unable to raise salaries to
recruit overseas workers.

Read the full report

Sector impact

Research from Huthwaite International suggests that just over half of businesses in the financial sector believe Brexit will have a long-term positive impact.

Findings include:

  • 51% of businesses remain confident about business growth post-Brexit, but worry short term with 33% concerned with the initial impact
  • Economic stability, a no deal Brexit and changes to laws and legislation rank amongst the biggest concerns post-Brexit

Read the full article